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Senior and Post-Acute Healthcare News and Topics

Post-Acute Compliance 2015: OIG Targets

As is customary in late fall, the Office of the Inspector General (OIG) of the Department of Health and Human Services released its Fiscal Year work plan.  As a reminder or preface, the work plan is the summary of investigations and focal areas the OIG plans to undertake in the upcoming fiscal year and beyond to ensure program efficiency and integrity and to identify and prevent fraud, waste and abuse (the latter is the most relevant activity).  Each provider segment reimbursed by Medicare is covered, some more so than others depending on the prevailing nature of program expenditures.  As of late (most recent years), the post-acute sector is targeted principally due to the outlay/expenditure growth (Medicare) for hospice, home health and skilled nursing care.

Below is the categorical highlights (not exhaustive) found within the 2015 Work Plan (the full plan can be found here ( ;

Skilled Nursing Facilities

  • Medicare Part A Billing: Scrutiny on claim accuracy and appropriateness of billed charges, particularly focused on therapy utilization and RUGupcoding.  Recent False Claims Act cases withExtendicare illustrate how the OIG views Medicare payments for inappropriate utilization and for care that is clearly inadequate.  This is a major risk area for providers and no SNF should discount the exposure, particularly if any of the following elements within the organization’s operations are present.
    • Therapy services provided by an outside contractor.  The OIG has identified previously that there exists a correlation between certain therapy agency contractors and patters of upcoding.
    • Disproportionately higher (as a percentage of census/payer mix), Medicare utilization.  The common threshold level is 30% or lower of total census.  Higher Medicare days as a percent of overall payer mix is a red flag for the OIG or an outlier.
    • Low overall Part B therapy utilization.
    • Skewed RUG distribution where the majority of days are falling the highest paying therapy RUGs (particularly ultra-high with moderate to minimal ADL scores – minimum/moderate assist levels)
    • Longer length of stays at higher RUG levels – minimal or infrequent Change of Therapy without corresponding Change of Conditions or vice-versa.
  • Medicare Part B Billing: The converse to the point previous is enhanced focus by the OIG on over-utilization or inappropriate utilization of Part B therapy services when Part A is exhausted or unavailable.  The OIG has noticed a trend for providers wary of Part A scrutiny to shift utilization to Part B. Again, the focus is on inappropriate billing patterns and utilization trends above or beyond, the historical norm.
  • State Agency Survey Reviews: The OIG plans to review how frequently and how well, state survey agencies reviewed and verified, facility plans of correction for completeness and compliance.  The gist: enhanced/additional federal look behind visits and desk reviews.
  • Hospitalizations: The OIG intends to review the hospitalization trends of SNF patients, identifying patterns of utilization for manageable or preventable care issues. A 2011 review found that 25% of Medicare SNF patients were hospitalized in a given year and the OIG is of the opinion that a percentage (likely sizable) is preventable and potentially, indicative of quality problems at the SNF level.


  • Hospice in Assisted Living: The OIG will monitor the continued growth trend of hospice care provided in Assisted Living facilities.  Part of this initiative is couched in the requirement within the ACA for the Secretary (of HHS) to reform the hospice payment system.  The OIG indicates that it will gather data on hospice utilization, diagnoses, lengths of stay, etc. for residents in Assisted Living facilities.  Medpac has noted that for many providers, particularly the larger national chain organizations, that hospice care in this setting is typified by longer stays and thus, monitoring is warranted.
  • General Inpatient Care: OIG will continue to monitor the utilization of General Inpatient Care within the hospice benefit for appropriateness and potential abuse.  As General Inpatient Care pays a higher per diem and many hospices maintain their own inpatient units, the concern on the part of OIG is misuse or abuse for payment or, to mitigate (agency) staffing shortages where the better alternative for the patient is Continuous Care.

Home Health

  • Reimbursements/Payments: The OIG will continue to monitor payments made to agencies principally for accuracy.  Prior investigations by the OIG identified that at least on in four claims were incorrect and potentially, fraudulent.  This initiative is a continuation of ongoing concerns by the OIG of excessive fraud and or waste in the Home Health sector principally due to improper application of the Medicare benefit and lack of substantiated medical necessity and/or supported clinical documentation of appropriateness of care (e.g., therapies particularly).

LTAcHs and Inpatient Rehab Facilities

  • Adverse Events: The OIG is targeting both settings for an analysis of adverse events/temporary harm circumstances to patients in the setting (falls, infections, etc.).  Inpatient Rehab Facilities provide 11% of post-acute inpatient therapy services and growth over the past decade or so has been consistent and steady.  Questions however have arisen regarding the actual value of such care compared to the care received in an SNF. The SNF is reimbursed substantially lower than the IRF even though many SNFs staff sufficiently to provide the same level of therapy services (up to 3 hours per day).  Similar concerns have risen within the LTAcH setting as to cost vs. outcome and quality, particularly as compared other setting comparable, lower cost settings such as SNF.  There continues in Washington, a generalized view that post-acute payment reform is overdue, particularly given the rapid expansion of the sector.  Within the payment reform movement is the growing view that setting differentiation and thus payment differentiation at the inpatient level is no longer warranted and consolidation is required to rid the excess capacity and reward economically efficient providers that demonstrate higher quality outcomes (SNFs in particular as well as rural swing bed hospitals and to a lesser extent, home health providers and outpatient providers).

December 10, 2014 Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , | Leave a comment

CMS Issues Proposed Home Health Rule for 2015

Just ahead of the Fourth of July holiday, CMS released its proposed home health rule changes for FY 2015.  As common, the proposal includes rate changes/modifications and clarifications and adjustments to Conditions of Participation.  The proposed rule continues a path for CMS and the industry of rate reduction/rate rebasing and movement toward greater emphasis on “pay for performance” or should I say, payment reductions for inadequate quality reporting.  Following is my summary analysis of key provisions in the proposed rule.

Rate/PPS Update: The target is a payment reduction/spending reduction of .3% or $58 million.  This is exclusive of the 2% sequestration cuts.  This proposal also includes the effect of year 2 of a 4 year rebasing effort to the HH PPS schedule.  The rate mechanics flow as such: A 2.2% increase/payment update less rebasing updates to the national 60 day episode payment rate, less the national per visit rate conversion, less the non-routine supplies conversion factor.  The 2.2% increase incorporates a market basket update of 2.6% less the productivity factor of .4%, totaling an increase of 2.2% prior to the adjustments. The Non-Routine Supply reduction is 2.8% and the national 60 day per episode payment includes a planned decrease of $80.95 to $2,922.76.

Face to Face Requirement: CMS is proposing a simplification to the current requirement, eliminating the current narrative note requirement from the encounter.  Physicians and/or the discharging facility must still document in the patient’s medical record the need for home-based care (skilled).  Re-certifications will still require a face-to-face encounter.  CMS also is proposing to eliminate payment to the physician for any face-to-face encounter if the such encounter occurs when the patient is NOT eligible for coverage under the HH Medicare benefit.

Wage Index Changes: Wage indexes inflate or deflate nationalized rates based on relevant location, labor costs.  CMS is proposing to update the Home Health Wage Index based on more current data from the Office of Management and Budget (data known as the CBSA or Core Based Statistical Area).  The proposed changes would phase-in over a one-year transition period, moving on a blended basis of 50% current Wage Index data and 50% 2015 (updated) data.  What we know so far is that providers feeling the biggest shifts are those that reside in the 37 counties presently considered part of an urban area shifting to rural and the 105 counties considered rural shifting to an urban area.  For further information on this topic, contact me (via the contact page on this site) or see the actual proposed rule.

Quality Reporting: CMS is proposing to set a minimum submission level of OASIS assessments for 2015 at 70% (less than this level imputes a 2% payment reduction to the provider) and then in subsequent years, move the percentage required for submission up by 10% (e.g., 80% in 2016).

Therapy Reassement Time Frames: The proposed rule would shift the requirement for a licensed therapist to re-assess the therapy plan of care and need from “as close to day 13 and day 19 as possible” to every calendar 14 days.

Coverage for Insulin: CMS is seeking clarification and input into the current list of coverage codes for insulin care (table 28) as to their adequacy in determining the need for skilled care for insulin management in the home. The program does not cover care for individuals capable of self-administration or who have another “person” willing to provide insulin administration as needed.

Revised Definitions for Speech Language Pathologists: Provides clarification that a Speech Language Pathologist is someone who has a graduate degree (accredited) in Speech/Language Pathology, or: is licensed by his/her state and has completed 350 hours of supervised clinical time, or; has at least 9 months experience unsupervised, or; has completed a national competency exam approved by the Secretary of HHS.

Value-Based Purchasing: CMS is offering for comment, a proposed Value Based Purchasing demonstration program in up to 8 states, similar to the hospital program.  In this approach, agencies would  receive a 5% to 8% adjustment in payment for  meeting performance criteria across a designate performance period.

July 9, 2014 Posted by | Home Health | , , , , , , , | Leave a comment

Analysis: Kindred Pursuit of Gentiva

In news just released, Kindred (the post-acute, skilled, rehab and LTAcH behemoth) has made two separate offers to purchase control of Gentiva, the latest a $14 per share offer consisting of half cash, half stock ($7 and $7). An earlier offer of $13 per share was rejected and it appears the $14 offer will see the same fate. Prior to the news, Gentiva stock was trading in the mid $6 range, down 20% over the preceding 12 months.  The value of the “deal” is pegged at $1.6 billion with $533 million of the total in cash and stock, the balance in assumed Gentiva debt.  On a combined basis, Kindred/Gentiva would weigh-in at $7.2 billion in annual revenues, operating in 47 states.

To date, Gentiva has held fast that it is not for sale and that its present plan, implemented as One Gentiva will create more shareholder value over-time than the Kindred offer.  In December, I wrote a similar analysis post on Gentiva/Harden (the merger) and the home health industry.  The post can be found at . In this post, I commented on the clear flaws in the One Gentiva strategy; principally the broadening of reimbursement risk strategy that is at the core of this strategy.  While Gentiva posted a modest recent quarter profit after $180 million loss, virtually all of the reported gain was a result of accretion from the Harden transaction, not improved operations.  For example, adjusted income attributable to Gentiva shareholders for the first quarter 2014 was $4,8 million compared to $7.1 million twelve months prior.  Net cash provided by operating activities for the first quarter was negative $17.7 million vs. negative $20.6 million one-year prior – not a resounding improvement.  Essentially, the fundamentals of the company are not improving and in some cases, set to erode going forward as the lion share of its revenues are Medicare home health and Medicare hospice (Odyssey) driven (88.5%).  Both Medicare programs face down reimbursement trend pressure, home health dramatically more so than hospice.  Hospice however, is under enormous industry-wide pressure due to continued fraud investigations among major players and the loom of federal program reform (the Medicare hospice benefit).  Essentially, hospice is a no-growth industry now.

Reviewing multiple factors and general industry trends plus the health policy and economic outlooks for both companies and the post-acute industry globally, below is my analysis of the factors influencing (or should influence) the Kindred and Gentiva position.

Kindred: Where Gentiva has a reimbursement risk concentration problem, Kindred has a location of care or outlet concentration problem.  Kindred is brick and mortar deep/heavy, actually too heavy.  Institutional outlets, especially in-scale and capacity are shrinking.  The revenue needs required to support institutional care, on a post-acute basis, are increasing while reimbursement is flat to falling.  The LTAcH and SNF trends are flat and the operational efficiencies available to any provider are minimal, save offloading or minimizing debt. The quality expectations evidenced in regulation and pay-for-performance models won’t allow any significant reductions in variable costs today.  To be an institutional player of success, one must have broad clinical capacity, right-sized bed compliments that match payer demand (occupied by the highest payers at high occupancy levels) and non-institutional outlets to capture discharge revenues plus participate in global contract arenas and networks (ACOs, etc.).  Kindred lacks the home health/hospice scale, especially on a matching outlet basis in its respective markets.  Gentiva adds this element, though at a bit of a risk via the amount of debt that Kindred would assume.  The acquisition is not without risk or a sure-winner.  True Gentiva brings the home health/hospice/community care component that Kindred needs as well as the scale to be immediately impactful, it simultaneously adds another level of reimbursement risk and industry risk that Kindred already has on a large-scale.  Managing and integrating the Gentiva elements into Kindred’s longer range provider of choice model will not come easy.  Likewise, the Gentiva acquisition will only mask temporarily, the fact that Kindred needs to right-size its own portfolio post its acquisitions of Rehabcare and Integracare (the latter a Texas limited home health/hospice provider) while still holding and operating, too much inpatient real estate that isn’t optimally performing in many markets.  In essence, the play makes sense but not fully positive until all the pieces are brought tightly together; a difficult and time-consuming endeavor.

Gentiva: Gentiva has the same problems that Amedysis has and had – it needs to shrink but it can’t.  Gentiva has too much debt and in a reimbursement environment that trends flat to down, it cannot grow itself out of its debt problem by “more of the same”.  It’s diversification strategy through the Harden acquisition is too little, too late and not scalable fast enough to have meaningful impact.  It similarly, can reduce expenses fast-enough via consolidation as it must chase revenue growth to survive and the revenue growth that pays the most is Medicare – a risk concentration it already has too much of.  It needed to re-tool 8 to 10 years ago, balancing its revenue model and expanding its clinical capabilities beyond the typical home health outlet.  Additionally, it needed to become more local-market centric and not simply a Medicare reimbursement machine like Amedysis (an accident waiting to happen).  The notion that its One Gentiva plan can create more value for Gentiva shareholders that the Kindred offer is wrong-headed.  Sans takeover talk, Gentiva trades between $6 and $8 and no upward trajectory is visible.  A simple return analysis illustrates that a Gentiva shareholder will wait at least 18 months or more to equal a return of $14 today, excluding opportunity costs on the investment.  Similarly, the risk concentration elements that could turn such an outlook even more dire are more than double on the Gentiva holding than on a comparable dollar for dollar holding with Kindred.  Kindred simply has more ways to generate revenue, a more stable expense base, lower fixed costs and less reimbursement risk concentration than Gentiva.  If Gentiva chooses not to sell, holding out for more than $14, I think the shareholders will pressure such a move in the near-term future.  The Kindred offer, with debt assumption is in my opinion,  a max value offer that 12 months from now, is off the table.






May 15, 2014 Posted by | Home Health | , , , , , , , , , , | Leave a comment

Home Health Focus: Gentiva/Harden and More

A couple of weeks ago, I wrote a post covering the Home Health PPS Final Rule for 2014.  As I was writing that post, I simultaneously reviewed the Gentiva/Harden deal plus the recent quarterly earnings of Amedisys and Almost Family (plus their acquisition of SunCrest HealthCare).  The earnings reports plus the analytics from these two recent transactions paint and interesting picture of where the Home Health industry is headed.

Starting with Gentiva/Harden, and analogous to the Almost Family/SunCrest deal, the transactions are not due to growth or really expansion; rather each is about creating defensive scale.  Gentiva/Harden is a bit of an oddity in so much that Harden has a brick and mortar component via ownership of a small portfolio of skilled nursing facilities in Texas. This element however, is not a complimentary piece for Gentiva and as such, my prediction is these facilities will divest from Gentiva post a final roll-up period.  The SNF piece is not what they do nor does it really provide a significant source of additional volume or revenue, net of the risk and asset holding cost.  Harden grew out from the facility ownership side and thus, the SNF component was in their “wheelhouse”.  The same is not true with Gentiva.  Regardless of the rhetoric from Gentiva regarding keeping all management, integrating all components, etc., transactions of this scale don’t work that way – they never do.  The outlet pieces and the home health book of business is what Gentiva is after.

The same is true in the Almost Family/SunCrest deal with one exception – it’s a home health – home health deal.  Almost Family is looking for outlets and the home health book of business to create scale and volume insulation.  To a certain extent, both transactions are also about “book of business” diversification; more so in the Harden deal.  Almost Family and Gentiva have a risk concentration in their home health revenue models known as Medicare.  As my post on the Home Health Final Rule covered, Medicare is a payment source that is shrinking via overall outlay and directed payments per episode. The belief among Gentiva and Almost Family is that mass, ideally scalable via more outlets and more efficient infrastructure will insulate the revenue and thus, earnings impact.  In short, even if the margin per each case falls, if more cases are attainable and the incremental expense in doing so is proportionately less than the incremental revenue gain (ideally by a factor of greater than 20%), then it makes sense to increase volume.  That’s the theory at least.

Looking at where Gentiva and Almost Family started in terms of earnings reports prior to or concurrent with the referenced transactions, each had their share of performance issues. Almost Family posted an earnings surprise (per share) positive (11% up over consensus) but delving into the numbers shows a continuing performance problem.  Additionally, the net impact of additional Medicare cuts foreshadows more negativity in the upcoming quarters, even in spite of the SunCrest deal.  It will take Almost Family all of 2014 to absorb and re-define the benefits or difficulties of the SunCrest deal,  In the meantime, their risk concentration in skilled nursing and Medicare remains high.  Their savior in the interim is a steady growth outlook for their non-Medicare personal care business. Volume growth remains attainable but in order for a continued bright earnings outlook, the growth in personal care, a less revenue rich source than skilled home care, must be equal to or greater than the revenue reductions forthcoming under Medicare.  My view is that in the interim, pending absorption of SunCrest, net income and revenues will flatten or trend slightly down.

Gentiva is moving on a parallel trend to Almost Family, with one exception – Odyssey.  Gentiva owns the nation-wide hospice provider Odyssey and as such, a  twist that separates or bifurcates its strategy from Almost Family exists. On the home health side, Gentiva is seeking outlet growth and looking to expand its presence in the non-Medicare, personal care world as well as the Medicaid waiver world commonly known as Home and Community Based Services (HCBS).  The Harden acquisition is the jump for Gentiva into this niche.  Prior to Harden, Gentiva was a non to bit player in the non-Medicare, personal and community care environment.

For the nine-months ending September 30, Gentiva lost $197 million.  Not surprising, the company announced, post the Harden disclosure, a consolidation and restructuring plan called One Gentiva.  The intent is to tighten operations, reduce redundancy, and coordinate revenue opportunities more closely between its home health operations and its hospice operations (Odyssey). The Odyssey segment revenue contribution shrunk by 7.5%, year over year.  Hospice clearly is a struggling segment as the overhang of the Vitas suit plus the changes in certification requirements and coding have effectively narrowed or literally closed, resources commonly used by providers like Odyssey to capture patients and attract new business.  The One Gentiva initiative will no doubt, further shrink the Odyssey/hospice component, both in terms of outlet numbers and operational infrastructure components in an attempt to mitigate further revenue and earnings erosion to Gentiva consolidated.

Placing all of the above into context and adding a quick peek at Amedisys, the home health industry is clearly struggling and trying to rebalance. Amedisys, once the biggest player in the home health industry, continues to reel post a series of federal investigations and fraud allegations.  Their recent settlement ($150 million) with the Department of Justice regarding Medicare improper billing allegations added another nail in a coffin that continues to emerge.  Continued losses, closure of outlets, and further Medicare reductions foretell a near future of non-existence.  My prediction is that Amedisys will soon be restructured to a private company via a private equity transaction.  The future for them is bleak and the industry outlook for Medicare home health providers of which Amedisys dominated, is fraught with revenue decline and earnings suppression.

The focus on the near future for companies like Almost Family and Gentiva is about survival.  Can the strategy of creating greater scale and volume in a declining revenue environment continue to produce positive earnings?  If the theory that when the margin per each drops, doing more per “eachs” with a controlled incremental expense element lower than the incremental revenue produced through greater volume is accurate, then at some point earnings improve.  Unfortunately, I have never seen this theory play-out in a home health or health care environment.  By its operational nature, home health is fairly inefficient in terms of staffing productivity and volume efficiency.  Within a volatile landscape, the inefficiencies increase as more variables are operative that can quickly, change referral patterns and volume fortunes.  Revenue always erodes faster than expense particularly since the bulk of the expense is staff that can’t be quickly recruited, trained and then fallowed when volumes decline or stagnate.

The other side of the strategy, diversification away from the Medicare risk concentration via increased volume in the personal care, Medicaid world offers some hope but it is not a silver lining.  True, dual-eligibles (Medicare/Medicaid) provide greater revenue capture opportunity but not without assuming another element of governmental payer risk – Medicaid. Medicaid has its share of problems and in the HCBS world, the providers therein paint a picture of cuts as demonic as in the straight Medicare world.  In virtually every state, Medicaid has a “spend-less” charge not a “spend-more” profile, even with Obamacare.  Medicaid expansion under the ACA drops cash into state coffers but only to address the increased enrollment of folks who are under 65 and uninsured.  This group is not a big user of HCBS or home health.  The 65 plus group that dominates the HCBS world and is the personal care side of the industry does not benefit via Obamacare and thus, states continue to seek ways to limit the financial impact to state funded Medicaid via HCBS.  As more states move to a Managed Medicaid model, the impact of shrinking or constraining Medicaid cash outlays for HCBS and personal care is just now emerging. In short, I just can’t buy the notion that diversification toward a Medicaid component is a salvation or a counter-balance to revenue reductions on the Medicare skilled side.  The impact in my opinion, is nominal in the near-term and perhaps equally or greater negative over the next two to three years.

December 6, 2013 Posted by | Home Health | , , , , , , | 2 Comments

CMS Releases Home Health Final PPS Rules for 2014

Last Friday, CMS issued its final rules for 2014 Home Health PPS.  As is typical within these final rules, earlier proposals are clarified and additional direction for the future becomes clearer.  In this case, most people who follow the Home Health industry trends will find the continuation of prior year themes; rate reduction, episodic rebasing, additional reportable quality measures, etc.

In context, CMS and Medpac had unveiled a plan years ago to reduce the expansive growth in home health spending.  Essentially, as reported profit margins under Medicare rose for the largest agencies to the upper-teens, CMS via direction from Congress took notice.  The net result is a series of revisions to the home health PPS, primarily driven at reducing payments and reallocating resources away (re-basing) from certain highly reimbursed PPS categories.  Additionally, though not a trend unique to home health, CMS has integrated quality measures and a reporting structure as a means to encourage a pay for performance dynamic.

Below is the synopsis of the final rule.  Readers who wish to see the entire final rule can e-mail me (contact information on the Author page) or comment on this post with a contact e-mail address and will forward accordingly.

  • Overall outlays for home health will reduce year-over-year by $200 million.  To get there, CMS updates home health payments by 2.3% ($440 million), offset by a required rebasing element of $500 million further offset by an additional $120 million in HH PPS Grouper refinements.
  • CMS also plans to begin rebasing the 60 day episodic payment rate (the national per visit standard). This adjustment is mandated by the ACA and must occur over a four-year period during which, no year may adjust by more than 3.5%. The final rule calls for a 2.7% rebase (reduction) though CMS has targeted the amount to a fixed-dollar element of $80.95, rolled through 201.  Oddly enough, when we do the math the amount of $80.95 equates to 3.5% of the 2010 calendar year amount. The CY 2014 60 day episode rate is $2,860.20.
  • The net result of the adjustments above is a 1.5% decrease in Medicare payments to agencies.
  • Two new quality measures are added in the Final Rule – hospital readmissions (during the first 30 days of the home health stay) and preventable emergency room visits.
  • In terms of the HH PPS Grouper refinements, CMS is removing two categories of ICD-9-CM codes.  The first is related to “excess acuity” meaning that the patient’s condition does not warrant care in a home health environment (too acutely ill). The second elimination is regarding codes that would not change the plan of care or adjust the appropriateness of home health case.  CMS plans of converting to ICD-10 on October 1, 2014.

My sole comment on the above relates to “no news”.  CMS had foretold as much and perhaps the only take-away clarity is that more is forthcoming.  Expect no additional spending from Medicare on home health payments for the upcoming years.  Flat will be good but personally, I think 1% to !.5% reductions are the new “norm” for the next four or so years.  In a conference call back mid-summer with some investment folks and industry followers, I and my firm called this result (on the head) when many were saying flat to a positive 2%.  With the ACA impacts and the stated objectives from CMS to realign home health spending, flat was never in the cards.

November 25, 2013 Posted by | Home Health, Policy and Politics - Federal | , , , , , , | Leave a comment

Home Health Outlook: 2013

In spite of best intentions, wicked winter weather across the middle U.S. has kept me off-track a bit and thus, I haven’t quite met my goal of having these all published by Valentine’s Day.  Below is my and my firm’s consensus Outlook on the Home Health industry for calendar year 2013 (part FY 2014).

Summary Comments: While we are bullish on organic patient volume growth, we are tepid on earnings growth for most providers.  The primary reason?  A continued federal onslaught to reduce and rebase, Medicare payments to providers.  Where we are bullish for the future is the prospect for industry growth in “new” payment models; namely ACOs and Bundled payments.  The trick with these new payment models is for the industry to fine-tune its role, its operations, and its ability to manage a more risky patient profile than found in the traditional, downstream fee-for-service environment of current.  The very nature of the new payment models is to shift or transfer certain risks to lower cost providers.  In this role, the post-acute industry and Home Health specifically, will find that managing a more complex patient is required while doing so efficiently and economically is the overarching requirement for success.

In the interim period as the industry is finding new footing in the ACO/bundled payment environment, revenue crunch will continue. Medpac is recommending continuing rate reductions principally via rebasing the Home Health PPS and eliminating the market basket adjustment.  Muddying this approach a bit is the loom of Sequestration cuts.  Additionally, states continue to struggle with Medicaid.  In October and in briefs of support on behalf of California to reduce provider payments, CMS and the Obama Administration argued in favor of a state’s rights to reduce provider payments.  While California is an outlier in terms of state fiscal health, the resulting support from CMS implies wide latitude will be given to states in terms of structuring payments if in fact, the states can provide supporting evidence that access will not be compromised.  Our quick assumption is that most provider segments demonstrate enough overall capacity that states will win the argument that rate reductions won’t adversely impact patient access.

Medicare : Thanks to prior decade payment machinations set-up by Congress to address a perceived access issue to patients requiring more therapy, the industry has since felt a backlash of negative activism with regard to Medicare and perceived (and in some cases real) overpayments for care.  As convoluted as this sounds, the crux is that Congress incented certain behaviors, providers took advantage of the incentives and all of sudden, Congress rises again and screams “fraud”.  Coincidentally, the FRAUD cry came when margins for providers crept near 20% on their Medicare book of business.  Suffice to say, we didn’t see anywhere near the fraud alleged moreover, providers properly taking advantage of an imbalanced payment system. The whole story here reminds us a favorite children’s book: “If you give a Moose a Muffin….”.

Medicare spending on Home Health approximates $19 billion.  Per Medpac, margins in 2013 on average, should be 11.8%, down from 14.8% in 2011.  The change is entirely due to rate cuts and market basket adjustments. Effectively, CMS has been imputing rate reductions for what it believes are agency inappropriate case-mix reporting and utilization. The ultimate challenge facing the industry is rebasing: A rebalancing of sorts, adjusting payments across the 153 HHRGs to more accurately reflect (CMS language) provider costs of providing care and desired outcomes of care as measured by OASIS – the industry clinical and functional assessment tool.

If we follow the Medpac/ACA pathway and assume CMS and Congress stays the course similarly, what we see is as follows.

  • Rebasing in 2014 -2016: The ACA directs the Secretary to accomplish this task with no more than a 3.5% reduction in payments in any one year equalling a cumulative impact (reduction) of 14% by 2016.
  • In 2015 and all following years, market-basket adjustments are offset by a productivity factor.
  • Net one and two above for the actual rate impact – a positive market-basket minus the productivity factor still positive, reduces the rate cut impact, etc.

Medicaid: Coverage under Medicaid for Home Health varies widely state to state.  States that have adopted and aggressively expanded Home and Community Based Services programs offer more expansive coverage than states that have not.  The trend we are seeing literally state to state is a global re-think of HCBS coverage and payments.  HCBS has grown in popularity and states are finding that while attractive, the programs are fraught with adverse selection risk (way more beneficiaries in queue than the states believed or desired and spending levels higher than forecasted).

Under Medicaid, each state is only required to offer coverage for Home Health to individuals receiving federal income assistance (Social Security and AFDC) as well as individuals who meet specific need categories such as the blind, disabled, etc.  States may expand upon the eligibility criteria but are not “required” to under federal law.

We have seen most states widely expand eligibility, principally as a means of forestalling institutionalization.  Most of this expansion occurred pre 2008 or pre financial collapse.  Today, states are re-considering the impact of expansion and many, like California are seeking injunctive relief from CMS.  What we don’t know as of yet is how Home Health, Medicaid and Medicaid expansion all fit together.  We think most states will approve Medicaid expansion hoping that the influx of federal dollars will abate the need to cut programs and payments, some no doubt negatively impacting the Home Health industry.  From our view, it is entirely a per state guessing game as each state has different fiscal challenges and different levels of Medicaid enrollment.  Thus, we also believe each state will de facto ration any new dollars from the federal government into Medicaid programs that the state believes are a priority.  In short, our consensus outlook on Medicaid for Home Health is flat as we are taking a wait and see approach.  We are confident however, that HCBS programs will not significantly grow and in most states, will continue to contract in terms of payment and enrollment (states capping program enrollment).

A final Medicaid comment concerns the number of states aggressively moving toward “managed” Medicaid.  While early in this transition, this movement may prove fruitful for Home Health agencies if they can plow the dual eligible ground and show high quality and lower overall spending.  Managed Medicaid exists, in theory, to help states constrain program growth via redirecting utilization and redirecting payments.  High quality, lower cost services are favored and thus, Home Health agencies properly aligned may do well in this environment.  Careful negotiation and skilled care management of patients between provider segments is required to profit and achieve tangible volume.

Other/Miscellaneous: In 2012, the OIG/CMS released a report regarding inappropriate billing activities among certain Home Health agencies. The report indicated that within certain geographies and among certain agencies, across 6 measures of questionable billing practices, the OIG noted that one in four agencies exceeded the threshold in at least one of the 6 measures used, thus indicating possible billing abnormalities. The states with the most suspect agencies with billing anomalies are Texas, Florida, California and Michigan.

In the 2013 OIG workplan, focus is provided for the HHA face-to-face requirement.  In a 2012 report, OIG found that only 30% of beneficiaries received an actual face-to-face encounter with the physician that ordered their care. Additional focus is provided on agency screening tasks required to eliminate employment of individuals with precluded criminal history. Finally of note, the OIG will focus on OASIS submissions from providers.  Specially, the OIG is looking to make sure providers are submitting their required assessments plus including proper billing codes matching the assessment data.

February 27, 2013 Posted by | Home Health, Policy and Politics - Federal | , , , , , , , , | 2 Comments

False Claims Act: Providers Beware

Lately I have fielded a growing number of questions regarding various applications/uses of the False Claims Act and Medicare billing inquiries.  What is disconcerting about these inquiries is their source; too many from providers or provider organizations.  One in particular arises out of an acquisition and this bears special note and comment which, I have provided toward the end of the post.

To start, the False Claims Act in summarized fashion for healthcare providers relates as follows;

(a) Any person who (1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; (3) conspires to defraud the Government by getting a false or fraudulent claim paid or approved by the Government;. . . or (7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person . . . .

(b) For purposes of this section, the terms “knowing” and “knowingly” mean that a person, with respect to information (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.

What this boils down to for providers is that a False Claim Act violation can occur either via deliberate act such as knowingly submitting a claim that is false or when a provider fails to seek knowledge that is common, acting in reckless disregard to the truth or circumstances surrounding the claim.  This latter element creates major risk for providers in terms of their use of outside contractors to provide Medicare covered services under Parts A or B.

Taking the two major facets of the genesis of False Claims Act violations separately, the first element of a deliberate act is fairly straightforward.  The majority of risk here occurs when providers bill for services not provided or not required by the patient. For example, in reviewing recent False Claims Act cases in hospice, the deliberate act(s) consist of placing people into the Medicare Hospice benefit that are by disease state, not terminal and/or in other instances, billing for continuous care and not providing the service.  In SNFs and arising out of the latest OIG report on SNF Medicare billing practices, upcoding patients to higher RUG categories where services were not provided and/or, not required.  Each example is a fairly clear, deliberate act or activity to garner reimbursement (bill the government) for care not required or not provided.

The second facet is more nuanced in so much that a provider can be only tangentially connected yet still guilty of completing a False Claims Act violation.  This element occurs when providers utilize third-party contractors to provide certain services yet fail to use due care to determine whether such services were actually provided and/or warranted.  In this situation, a provider of a Part A or Part B covered service using a third-party contractor to provide some element of a care service, cannot eliminate the False Claim Act liability by hiding under a veil of a contractual relationship or agreement; especially if the provider caused the contractual relationship to exist and benefitted by the contract (logical).  Not knowing a violation occurred or could occur via not employing basic due diligence and standards is considered a willful act under the False Claims Act and thus, a violation subject to remedy and penalty.

Getting more concrete: A provider (SNF, Home Health, etc.) for example, under Part A uses a therapy contractor to provide physical, occupational and/or speech therapy. The contractor provides certain information to the provider, as required by contract, to generate Part A claims.  At a later date, claims are reviewed or probed via a ZPIC or RAC process and determined that the same are suspect and unjustified.  The provider states that the contractor is to blame yet, cannot substantiate that it took any due care to audit the contractor’s work or to review claims for accuracy and integrity.  The contractor in this case may or may not be tangentially liable for the False Claims Act violation, based on the provisions of the contract, but the provider is “totally”. Why?  The provider is the organization that fraudulently or falsely billed Medicare and caused the violation, even though its claim that it did nothing knowingly or intentionally (all the contactor) is used as a defense. The False Claims Act does not require deliberate action in perpetrating the event merely a disregard of the truth or the events (hear no evil, see no evil, speak no evil).

With the CMS OIG directly stating its intent to spend more time reviewing SNF claims, particularly those that fall into high therapy RUG categories, and the industry-wide reliance on third-party therapy contractors, SNFs need to pay particular attention to the definitions within the False Claims Act.  Of principal importance is the requirement or lack thereof, of direct action.  Merely a failure to hold contractors accountable and to exercise due diligence as part of the claims submission/billing process can lead to a False Claims Act violation.  As I have written before, the simple action (or in this case, inaction) of failing to benchmark RUG levels against national and regional data, to employ an outside resource to periodically test claims, and to monitor the basic provision of care from contractors is all that is required to fit into the category of “reckless disregard” for the truth or accuracy of claims submitted.

Lastly, as mentioned initially, False Claims Act violations that arise from an acquisition, while rare, can occur.  I know of one specific case and the circumstances are daunting and troubling.  When an acquirer assumes a provider number from an acquired provider, the assumption comes with liability for prior acts.  As no statute of limitation exists for fraud, the acquirer is thus the same provider as the original provider via assumption of the former provider number and status.  CMS does not differentiate as to the circumstantial aspects of liability for fraudulent actions between providers.  While a purchase agreement may stipulate limitations on liabilities arising from prior actions of the former provider, CMS’ enforcement and remedies don’t translate similarly.  In other words, CMS will seek enforcement and issue remedies against the current provider, even if the acts were committed by the former provider.  The sole remedy for the acquirer is contractual, removed entirely from CMS.  As contractual disputes require time and remedy through arbitration or court proceedings, enforcement and other remedies from CMS do not.  The actions taken by CMS are independent of the contract between the seller and the acquirer.  Again, the “we didn’t know” defense is useless as the assumption is on the part of CMS, “you chose to assume the provider number and the liabilities that inure thereto (such that they existed)”.

My best advice to acquirers, and I have gone down this road many times, is to obtain new provider status via application and issuance of a new provider number.  I know this process can be a bit timely and bureaucratic but nonetheless, it stands as the only surefire way to immunize the acquirer from former actions of the seller, at least where Medicare. billing irregularities and False Claims Act violations are concerned.  The alternative remedy is extensive and thorough pre-closing due diligence on claims and frankly, this process is more tedious, onerous, and expensive than obtaining a new provider number.  Additionally, sellers can get “cranky” from the required probing to complete a thorough due diligence of claim activity, such that deals can easily morph negative.  Finally, never and I mean never, assume a contract during the acquisition, especially where the contract is for a third-party provision of care and services tangential to Medicare/Medicaid claims.  Negotiate new; for safety sake.

November 27, 2012 Posted by | Home Health, Hospice, Policy and Politics - Federal | , , , , , , , , , , , , , | Leave a comment

Five Things Every Healthcare Executive Should Focus On: Updated, Revised

More than two years ago I wrote a post regarding “five” things every SNF administrator should focus on and lo and behold, a reader asked late last week if I would revisit this subject.  She (the reader) is not an SNF administrator so she asked if I could focus more globally; sort of a “best practices” approach.  While each health care industry segment has its nuances, in reviewing my travels, the challenges and successes leaders have, where failures occur, and where careers are made and sustained, I quickly found commonality in approaches and focused competencies.

Healthcare leadership is complex and very dynamic.  The alchemy is nearly one-part inquisitor, one-part psychologist, and one-part theoretician.  Those that do well and thrive, regardless of industry segments, are today “global” thinkers capable of transitioning to tactician seamlessly.  They are outcome oriented and know the pieces of the puzzle well enough to be bull**it proof.  They think and act as if synergism is their main duty and they understand (acutely) the law of unintended consequences.   Bottom line: They see cause and effect and constantly seek ways to shorten the distance between the two.

Industry issues aside regarding changing reimbursement, regulation, etc., the focal core that I find as key and thus, displayed in action by the successful executives is as follows.

  1. Quality: This is an oft used buzzword but very skilled and successful executives can articulate this for their business immediately.  In healthcare, quality is all about tangible outcomes that patients experience.  Going one step deeper, quality today is also about a measurable outcome at a particular cost.  In my economist jargon, this is about utility and warranty.  Utility is maximized in healthcare when the payer and the patient receive a desired, tangible outcome at a market or below market price.  Warranty in healthcare is about the outcome’s sustainable benefit to the patient and the payer.  Technical yes but this theory is a key focal area for healthcare executives.  Think about it tangibly in light of today’s issues.  Hospital executives need to understand this because it impacts re-hospitalizations.  The outcome must match the warranty or in other words, the care must be complete such that avoidable readmissions are low or non-existent.  For SNF executives, the same holds true but with a slight twist.  The SNF executive must deliver excellent care all while minimizing the risk areas that lead to re-hospitalizations such as infections, falls, and medication errors.  As a core competency, the best executives I work with didn’t wait for the government to tell them to reduce their falls, reduce their re-admissions, etc.  They knew these issues years ago and had already understood the relationships between quality or utility and warranty.
  2. An Outside-Inside View: Where I find failings in healthcare leadership it almost always starts with executives that believe their challenges and their industry are utterly unique.  They not only bought the healthcare executive manual but they memorized it.  They seek only peer knowledge or interaction, often I believe to validate that “they” are doing the same thing everyone else is doing.  Alas, the story of the Lemmings on their way to the sea is cogent.  What I see as key competency among the best is that they have an “outside-inside” view competency.  This outside-inside view is characterized by looking beyond their industry at analogous problems or issues and seeking solutions that are applicable.  Yes, healthcare is unique but certainly not so unique that strong parallels in marketing, customer service, project management, systems design, etc. can’t be found via other industries.  Across my career, the best ideas I’ve used came from other industries – not healthcare.  I simply altered the concept to fit the situation.  Philosophically, “the coolest things in life exist in places where their aren’t any roads”; a quote from a former camp counselor to my son.  Developing this competency is all about forcing oneself to explore well beyond the industry noise, rhetoric and ideologies.
  3. Small Spaces and Closet Organizers: As odd as this heading sounds, it makes sense to me when I see it applied.  The industry has run through its hey-day where bigger was better and, “if you build it, they will come”.  Really strong executives today have learned how to creatively adapt and re-adapt and they realize the core competency of “revenue contribution” per square foot is the new reality.  This competency area is all about revenue maximization and in a go-forward universe of revenue stagnation via reimbursement cuts and flat payments, using space efficiently and keeping the closets organized rather than overflowing with stuff not needed nor ever used, is the requirement.  Gone are the days where more is better or additional lines of inventory make sense.  This focus is truly a trend from manufacturing where realities on plant size, productive capacity and just-in-time inventory came to roost many years ago.
  4. The True Meaning of Health Policy: This is about the Paul Harvey requiem; “the rest of the story”.  Health policy impacts are point in-time in terms of regulatory implications and reimbursement implications but woven together, a trend is evident.  This competency area is about knowing what the policy trends are, where Medpac is going and why and how the enterprise led should position accordingly.  I have written repeatedly that regardless of regulation and new laws like the PPACA, core issues about entitlement financing, sustainability of funding, etc. will beget certain and permanent changes in health policy.  Ignoring these realities and the resulting policy trends is akin to committing hara-kiri with a butter  knife; no one blow is fatal but the culmination of all blows leads to a slow, painful death.  Much is trending right now regarding networks, ACOs, bundled payments, pay-for-performance, accountability, fraud, etc.  Knowing not only the implication of each but how the same is directing the future is a core executive competency.
  5. Freakonomist: OK, I’m stealing from a book title here but the point is simple: Healthcare executives need to understand at a certain level, core human behavior and economics.  I’m not talking about finance or reimbursement but behavioral economics.  One of the major problems or arguably, the single most demonic problem with healthcare today lies in the axiom that “what get’s rewarded, get’s done”.  We have lived too long on the native belief that acute, fee-for-service, episodic medicine or care is how the U.S. health system thrives.  Thus, we have overspent and over-taxed the system without regard to a potential breaking point.  We have arrived at such a point.  Today’s healthcare executive must realize this core reality and to survive and thrive, re-define his/her leadership to developing systems and services that prevent utilization or revise utilization to more of a minimalist plane.  Those that embody the philosophy that “better is better” rather than “more is better” will understand this innately.  This competency is about “solving” core problems and not chasing root, flawed ideologies of the past.  Profit and success will come via innovation and system-thinking not from finding new ways to exploit Medicare and Medicaid.

November 13, 2012 Posted by | Assisted Living, Home Health, Hospice, Senior Housing, Skilled Nursing | , , , , , , , , , | 3 Comments

Catching Up, Part II: Home Health and Hospice

As the week concluded (sort of), I’m about half-way back in terms of cutting through the stacks of research and notes that I compiled through August and into early September.  While time away from work is necessary for my sanity, it certainly promotes insanity upon return.  Below is Part II of “catching up”, entirely focused on home health and hospice.

Home Health: The last few years have been rough for the home health industry and in particular, the major players such as Gentiva and Amedysis. A quick replay of “what” has transpired over the past few years is key to understanding why the industry is where it is today.  Beginning in 2009 and 2010, Medpac issued (in its annual report to Congress), unflattering findings regarding industry growth and profit margins.  Integral to its comments was a focus on the growth tied not only to rate but to utilization patterns – particularly therapy services.  Of course, Congress is somewhat to blame for a rapid increase in home therapy under Medicare as it believed that patients were denied adequate therapy services in their homes due to poor reimbursement rates.  In 2008, CMS altered a  “bonus” provision based on therapy visits to combat a perceived reduction in therapy services to home bound patients as the “stay” or coverage period elongated.  Previous, the bonus of a few thousand dollars kicked in after 10 visits.  The change incorporated bonuses for visits beyond six, and then beyond 14 and then beyond 20 – each incrementally higher.  As one would suspect, HHAs altered their service provisions to maximize visits and bonuses according to the new schedule.  Medpac sounded a subtle alarm.

In the summer of 2011, the Senate Finance Committee began an inquiry into the billing and utilization practices of the home health industry under the Medicare program.  Particular focus was paid to the biggest providers (Amedysis, Gentiva, Almost Family, LHC, etc.).  In October of 2011, the Wall Street Journal published an article foretelling the Senate Finance Committee’s findings.  Stopping just short of accusing Amedysis, Gentiva and LHC of fraud, the article indicated that these providers effectively “gamed” the reimbursement system and structured referrals and visits to maximize reimbursement under Medicare.  The irony (in the story) is that all providers in every segment, follow similar practices perhaps just a shade less overt.  The trigger to the inquiry was less the behavior suspected but more the profit margins the major companies were posting on Medicare book-business of plus 80%.  In short, 17 plus percent Medicare margins was the problem.

Fast forward to present, the industry has struggled since with the major players Amedysis, Gentiva, LHC,, all producing earnings reductions and corresponding lower share prices.  Amedysis stock price has dropped from a mid 2011 price of  $38 per share to $15.50.  It had sunk as low as $10 per share in January.  Gentiva went from the mid-twenty dollar range in early 2011 to under $3.00 in mid-fall of 2011.  Today, it has rebounded to $12,50, still more than $10 per share under its average price in early 2011. Almost Family fell from the upper $30’s in early 2011 to $10.50 in January.  It has since rebounded to $21.50, more than $15 dollars off the highs of 2011. LHC went from $30 per share in early 2011 to $18.50 today, falling to $13.00 in early 2012.  For Amedysis, the biggest Medicare provider of home health, earnings are off 65% compared to a year ago and revenue has shrunk by $17 million over the same time frame ($12 million of which is Medicare).  The sole reason for the changes in fortune for the “big” players and the industry?  Medicare payment reductions.  This stems from an overt attempt on the part of CMS to reign-in the industry growth and to lower the profitability of Medicare as a payer.  Conceptually, as reported by Medpac, Medicare is and has been, too generous in its payments.  The belief is that a reduction in payments to more normative profit levels (whatever that is in government speak) won’t limit access or reduce significantly, the number of providers in the industry.  So far, from my vantage point, this is accurate.

Across most (virtually all) business elements, the prospects for the Home Health industry as far as Medicare is concerned, remain bleak.  The primary reason is continued reimbursement cuts under Medicare.  On October 1, the 2013 Medicare rate reduces by .10%.  While this is almost good news, the possibility of sequestration cuts (the fiscal cliff, mandatory spending reductions from the budget impasse deal of 2011)  layering on an additional 2% reduction looms as more bad news.  For Amedysis, a valued agreement with Humana ended on September 1.  This contract evaporation will have a negative effect on go forward revenues and earnings.  For all of the industry, future guidance on market basket rebasing foreshadows more bad news than good news as rate rescission via rebasing is a continued certainty.  If this isn’t enough to chill growth and earnings prospects near term, the implications going forward of a Value Based Purchasing program under Medicare for home health ices the cake.  This pay-for-performance approach, mandated under the ACA, will require substantive changes for the industry in terms of mirroring utilization, cost, and quality data across a series of industry metrics.  Like hospitals, the proposed structure (as evolving) under a VBP approach provides withholds for poor performance and offers incentives for improvement.  The true net result of these types of programs is lower outlays – a clear initiative to reduce utilization and to target certain behaviors economically – pay for performance.  I have the report to Congress submitted by the DHHS regarding implementation of a VBP program if anyone would like a copy – e-mail me at or add a comment to this post with a valid e-mail and I will forward the PDF to you.

Home Health summary from me: Be prepared for some rocky roads ahead.  The best, good news for the industry is the continued development of ACOs and other integrated care models and networks.  Home Health is a key component in ACO models and thus, for those agencies heavily invested and infrastructure ready on the management of chronic diseases, the ground going forward is fertile, assuming supporting outcome and patient satisfaction data confirms the “agency case for support”. Alas, the Amedysis, Gentiva, high-flying, heydays are over but room still exists for growth and profitability for those than can culturally shift and revamp their revenue and profitability models to the “new” reality.

Hospice:  This is another industry segment that is struggling somewhat as census gains for most providers are flat and utilization trends bear no long-term “real” growth.  For the past eighteen months, I’ve watched the hospice industry rather closely and even closer, the fraud cases opening and ongoing.  As I have written in previous posts, there is a “core” simple reason so much fraud is occurring in the industry; too many providers chasing too few truly, organically terminal patients.  For ease of definitional purposes, organically terminal is a patient that presents with a condition or series of conditions that sans aggressive or interventionist treatment, will die within six months or less.  True, a few live a shade longer but in actuality, fully 90% should and would pass away inside of six months.  Using just this definition, the Medicare definition, a quick analysis of utilization data suggests that the industry is likely over-sized by nearly 33% (a third).  Essentially, one-third of the agencies could fold (although geographically, this may be problematic) and the patients that fit the Medicare definition would continue to be adequately served.

Some will no doubt ask (or holler at me), “how do you know”?  The answer: Simple math.  Looking at utilization data produced by Medicare by diagnosis and length of stay tells me that the fastest growing diagnoses are neurological disorders, debility/failure to thrive and dementia.  When I pull-out clear neurological diseases that are organically terminal, I’m left with a hodge-podge of “all other”.  Correlate the growth in these diagnoses with the accelerating trend in longer lengths of stay and a picture of questionable certification becomes visible.  Next, I look at length of stay by places of care to see “where” this trend is leading.  Oddly enough, there is no evidence of expanding lengths of stay occurring when the “place” of care is at “home” or within a hospice inpatient environment.  The visible expansion is occurring when the patient resides in a nursing home or an assisted living facility.  Finally, I circled back to the OIG report on the industry from 2011 and their findings that 82% of the claims reviewed for patients residing in nursing homes did not meet the Medicare coverage criteria.  While no doubt some of these claim errors are a result of poor documentation and clerical errors, the evidence seen almost daily in and across industry related fraud actions points to an inordinately high rate of “specious” certifications.  To the point one step further, the same report noted that “hundreds” of hospices had more than two-thirds of their case load coming from nursing home patients.

It is hard to conclude otherwise that the industry is not fraught with an over-supply of providers and thus, a underwave of potentially fraudulent claims.  What is evident from the cases involving Vitas, Gentiva/Odyssey, SouthernCare, HospiceCare of Kansas, and the Hospice of the Comforter (and I could go on) is that without stretching coverage criteria determinations and inducing referrals and kicking-back dollars for less than qualified patients, the industry would be a good amount smaller in provider numbers than where it is today. De Facto: If you have to cheat to survive, you have no real business stability.  As with home health, I suspect rocky roads ahead for the industry and increasing regulatory scrutiny industry-wide.  The good providers will survive but not without having to navigate some minefields.

September 18, 2012 Posted by | Home Health, Hospice, Policy and Politics - Federal | , , , , , , , , , | Leave a comment

What’s Trending: A New Feature

By popular request, I’ve created a new feature to this site to cover issues and topics “in brief” that I am watching or in some cases, directly tangential to by engagement.  Weekly, my inbox is awash in “what have you heard?”, “are you seeing this?”, “what’s going on with?”, etc., type questions.  I do try to answer them all to the extent possible and then one day, someone asked if I could compile my comments into a weekly or bi-weekly piece and route it or post it accordingly.  This is my first compilation of what I think, will occur on an every week to ten-day basis (if I can keep up).

  • Supreme Court Decision: Thursday is the day we learn the decision of the Court regarding the future existence of the PPACA; the focal discussion on the individual mandate.  My reasoned opinion, obtained in part from my myriad of qualified and unqualified sources is that the Court will find the mandate unconstitutional.  Personally, I believe that the Court will also effectively reason that the core of the PPACA then falls, applicable to the exchanges, Medicaid expansion, and the expanded benefit and coverage criteria mandates for commercial/private insurance policies.  I am less clear about how the language will be interpreted from a policy perspective but suffice to say, I am solidly in “the camp” of those who believe the PPACA will be shot full of holes on Thursday, left to crumble as it is structurally gutted.
  • Post PPACA Demise: Regardless of the ultimate outcome, I am advising providers to look at the core concepts embedded in the PPACA and to quickly understand, the health care landscape has fundamentally changed.  Remember, CMS has broad and powerful rule-making capabilities and what once may have been a part of the PPACA can quickly return in elemental form via administrative law.  For those who will joyfully celebrate the end of the PPACA, I offer a quick refresher regarding the “law of unintended consequences”.  An activist CMS/DHHS can quickly re-visit a number of core concepts and apply the same with perhaps, nuances and twists that are more onerous than applied in the PPACA.  Thus, I suggest everyone stay close to a script that focuses on quality based payments, bundled payments, new network and delivery systems (ACOs), re-hospitalizations, new outcome measures, coordinated care, and Medicare payment restructuring and re-basing (the latter necessitated by the poor fiscal outlook for Medicare, PPACA notwithstanding).
  • Hospital Observation Stays Rising: Starting October 1, hospitals will receive weighted payment reductions for re-hospitalizations occurring within 30 days post discharge for Medicare patients hospitalized concurrent with one of three DRGs – heart failure, pneumonia or MI/heart attack.  Payment reductions will occur for all Medicare payments for hospitals that rank retrospectively, in the bottom quartile of performance on re-admission rates compared to applicable peers.  In October 2015, additional at-risk DRGs are added and monitored for re-admissions.  The trend that we are seeing today is for hospitals to take a “cautious” approach with Medicare patients presenting via outpatient settings, nursing homes, and through the Emergency Department as applied to admissions.  While penalties are not yet in-force, hospitals are mindful of the re-admission implications and are using observation stays as a vehicle to expand care without triggering an inpatient admission and thus, a possible adverse event.  I am not yet seeing a diagnosis correlation to these events simply a Medicare implication.  The downstream implication is that a hospital discharge to an SNF may not include a three-day qualified “inpatient” stay for Medicare coverage.  I hear increasing complaints from SNFs about this issue and I advise the same tactics; get to the hospital in-person to qualify your discharges and do your homework.
  • Post Acute Care Transitions: In light of the topic above and the focus on avoidable re-admissions, post-acute providers need to get on-board and quickly.  Hospitals are loath to do business with weak post-acute providers that beget re-admissions in 30 days, regardless of the original hospital admission DRG; too much risk.  SNFs, home health providers and to a lesser extent, hospices need to focus on tightening their care transition approaches and increase their ability to insulate against unnecessary discharges to the hospital.  Increasing internal clinical competence, strengthening physician relations, improving pre-admission assessments, improving staffing particularly on off-shifts and weekends, developing transition algorithms for various disease states and routine discharge causes, and working with families via education are all key components in improving post-acute care transitions.
  • Hospice Still under Watch: I am hearing constantly from hospices that are being probed, struggling for referrals and having re-certs denied.  Frankly, this isn’t surprising as almost week by week, we learn of another settled Qui Tam case involving False Claims Act violations.  The most recent occurred with Hospice Care of Kansas, strikingly similar to others within the industry.  The Feds smell blood in the water here and as I have cautioned before, one public Qui Tam action begets others, particularly when large dollars are involved.  Whistleblower actions are a new cottage industry within health care and hospice claims are low-hanging fruit.  Here’s the take away and for those who haven’t heard me lecture on this subject or read other pieces that I have written on it, this isn’t “news”.  Hospice is a niche industry and under Medicare, very oddly regulated with ill-defined eligibility and coverage criteria.  The Medicare guidelines are frankly dated and the payment, inversely proportionate by setting and by length of stay.  The combination of dated regulations, improperly incentivized payments, and non-diagnosis specific coverage determinations can’t help but create an environment of fraud.  Mix Medicare with Medicaid payments that over-arch within nursing homes and certain home/community based settings and effectively, open flame is applied to a combustible liquid.  In reality, there are too few organically qualified, terminally ill Medicare patients that desire and elect hospice, compared to the number of Medicare hospice providers.  By “organically” I mean patients with classic end-stage diseases or conditions such as cancer, end-stage Parkinson’s, certain categories or stages of heart failure, COPD, etc.  In these cases, certainty without treatment and intervention is known.  Expanding the eligibility criteria (for providers) under Medicare is fairly easy as diagnostic codes are not required for coverage nor really, is evidence of decline in status though recently via probe activity on recertifications, I have seen situations where CMS has denied continuation of coverage for lack of evidence of terminality (evidenced by condition or status deterioration).  Bottom-line: Hospice will remain under scrutiny for quite some time and the net result, a stagnant environment for referrals and new patients will persist.  I expect the industry to shrink in total volume or marginally, remain flat over the next three years.

I hope everyone likes this new feature and for regular readers and followers, please feel free to keep your comments and questions flowing. I’ll get to them as best as I can.

June 26, 2012 Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | 1 Comment